Montezuma was founded by William Beauchamp, a farmer-physician from South Carolina, about 1834. He came to Mercer County in 1832, cleared a farm, and laid out the original village, 35 lots which he registered in 1835. The choice of the town's name probably reflects the presence of a nearby tribe of Chickasaw Indians, descendents of the Aztec Indians in Mexico, and may have been an attempt on the part of Mr. Beauchamp to maintain friendly relations with this tribe. Some early settlers referred to this tribe as the Montezuma Indians.

In 1838, Mr. Beauchamp and John Wyatt added 32 lots, and in 1839 George Marsh added 84 more. Montezuma grew rapidly during construction of the Reservoir and its completion about 1850 paved the way for one of Montezuma's main industries, fishing. From the 1870's until into the 1900's, large quantities of fish and turtles were harvested from the lake and sold commercially.

The first church was the Disciples' Church, organized in 1842, followed by the United Brethren Church in 1845 and the Methodist Episcopal Church soon after. The Catholic Church, now Our Lady of Guadulupe, was established in 1903.

In 1881 a narrow gauge system, later the Cincinnati, Hamilton and Dayton Railroad, was extended from Shane's Crossing to Dayton, passing through Montezuma. By 1882, Montezuma had a steam sawmill, a tile factory, three stores and the Montezuma Hotel. Within the next 20 years there was a carriage and buggy manufacturer, a grain elevator and a coffin factory, which used the black walnut that was so plentiful in the area. The early 1900's saw the addition of three grocery stores, a meat shop and several barber shops and taverns. This was also the beginning of the tourist industry, thanks to the CH&D Railroad. The end of the railroad in 1923 signalled the end of the growth of the village.

From the late 1800's on, the area was known for its sport fishing and hunting and several area guides known throughout southern Ohio. Today, many of the descendents of these first "tourists" return to the area and a large number have settled in and around Montezuma after retiring.

The present day Montezuma is a neat, clean village whose wide streets show unusual foresight on the part of William Beauchamp. Houses are neatly kept and the general air is one of quiet prosperity.